Chapter 5 - Decision-Making Process (DMP)

1. Programmed vs. Non-Programmed Decisions

o Programmed Decisions: Routine decisions made with

established procedures and guidelines. These decisions are often
repetitive and predictable, such as reordering inventory.

o Non-Programmed Decisions: Complex, non-routine decisions

that require unique solutions. These are usually made in
uncertain or unpredictable situations, like entering a new market.

2. Reasoned vs. Intuitive Decision

o Reasoned Decision: Decisions made through careful analysis

and evaluation of alternatives, supported by facts and data.

o Intuitive Decision: Decisions made based on gut feelings or

experiences, often without extensive analysis.

3. Prescriptive Decisions

o Prescriptive decisions are those that provide clear guidelines on

what should be done in a given situation. They are based on
policies, rules, or laws.

4. Brainstorming

o A creative problem-solving technique where group members

come together to generate a large number of ideas or solutions
without evaluating them immediately.

5. Uncertainty

o Refers to situations where managers do not have complete

information and cannot predict the outcomes of decisions with
certainty.

6. Nature of the Decision-Making Process (DMP)

o The DMP involves identifying problems, gathering information,

generating alternatives, making decisions, and evaluating the
outcomes.

7. March & Simon Administrative Model

o This model suggests that decision-making is often not fully

rational due to limited information and cognitive constraints.
 Managers make decisions that are "good enough" rather than
optimal (bounded rationality).

8. Assessing Alternatives

o Involves evaluating the pros and cons of different options before

making a decision, taking into account criteria such as cost,
feasibility, and risks.

9. Groupthink

o A psychological phenomenon in which the desire for harmony

and conformity in a group results in an irrational or dysfunctional
decision-making outcome. It often leads to poor decisions due to
lack of critical evaluation.

10. A Learning Organization

 An organization that continuously transforms itself by enabling

employees to acquire and share knowledge, promoting innovation, and
improving performance.

11. Nominal Group Technique

 A structured decision-making process in which individuals contribute

ideas, rank them, and then discuss and evaluate the options as a group
to make a decision.

Chapter 6 - Planning

1. Levels of Planning

o Strategic Planning: High-level planning that involves setting

long-term goals and defining overall strategies for the
organization.

o Tactical Planning: Medium-term planning focused on

implementing the strategic plan through specific actions.

o Operational Planning: Short-term planning that focuses on

day-to-day operations and achieving immediate objectives.

2. Time-Span

o The time-frame for planning. Short-term plans typically cover a

year or less, while long-term plans can span several years.
3. SOP (Standard Operating Procedure)

o A set of written guidelines or procedures that outline how specific

tasks or operations should be performed in an organization to
ensure consistency and quality.

4. A Rule, A Policy, A Procedure

o Rule: A specific guideline that must be followed, often non-

negotiable (e.g., dress code).

o Policy: A broad guideline that provides direction for decision-

making but allows flexibility (e.g., customer service policy).

o Procedure: A series of steps that describe how tasks should be

carried out (e.g., employee onboarding procedure).

5. Formulation

o The process of developing strategies and plans to achieve

organizational goals, including analysis of internal and external
factors.

6. SWOT Analysis

o A tool for analyzing an organization's Strengths, Weaknesses,

Opportunities, and Threats to make informed decisions about
strategies.

7. Related vs. Unrelated Diversification

o Related Diversification: When a company expands into new

products or markets that are similar to its existing business. This
strategy allows the company to leverage its existing resources,
knowledge, and expertise. For example, a car manufacturer
starting a motorcycle division would be considered related
diversification.

o Unrelated Diversification: When a company expands into

industries or markets that have no direct connection to its
current business. This is riskier because the company lacks
experience in the new industry. An example would be a car
manufacturer acquiring a clothing brand.

8. Synergy
 o Synergy occurs when two or more business units or companies
work together in a way that creates greater value than if they
operated independently. The idea is that "the whole is greater
than the sum of its parts." For example, a tech company
acquiring a software firm may improve innovation and efficiency
because both companies share knowledge and technology.

9. Vertical Integration

o A business strategy in which a company expands its control over

different stages of its supply chain. There are two types:

1. Forward Integration: When a company moves closer to

the consumer by controlling distribution or retail
operations. Example: A dairy company opening its own
milk stores instead of selling through supermarkets.

2. Backward Integration: When a company takes control of

its supply chain by producing its own raw materials or
components. Example: A car manufacturer producing its
own tires instead of buying them from a supplier.

10. Generic Strategies (Michael Porter’s Strategies)

o Porter identified three generic business strategies that

companies can use to gain a competitive advantage:

1. Cost Leadership: A company aims to be the lowest-cost

producer in its industry, allowing it to offer lower prices
than competitors. Example: Walmart.

2. Differentiation: A company creates unique products or

services that stand out from competitors, allowing it to
charge higher prices. Example: Apple.

3. Focus Strategy: A company targets a specific niche

market and either competes through cost leadership or
differentiation. Example: A luxury watch brand that only
sells to high-income consumers.

11. Implementation

o Implementation refers to the process of executing a strategic

plan and turning ideas into reality. It involves allocating
resources, assigning responsibilities, and monitoring progress to
 ensure that business strategies and objectives are successfully
carried out. Poor implementation can cause even well-designed
strategies to fail.

Chapter 7 - Organizing

1. Traditional vs. Contemporary Concepts

o Traditional Concepts: Focuses on hierarchical structures, top-

down decision-making, and centralized control.

o Contemporary Concepts: Emphasizes flexibility, collaboration,

and decentralized decision-making, allowing for more adaptable
and responsive organizations.

2. Mass-Production Technology

o A technology-driven approach to production where products are

made in large quantities using standardized processes. It focuses
on efficiency and cost reduction.

3. Job Design

o The process of organizing tasks, duties, and responsibilities into

jobs that employees can perform effectively.

4. Job Enlargement

o The process of increasing the number of tasks a worker performs

to make the job more varied and less monotonous.

5. Job Characteristics Model (Hackman & Oldham)

o A framework that identifies five core job characteristics (skill

variety, task identity, task significance, autonomy, and feedback)
that influence job satisfaction and motivation.

6. Feedback

o Information that helps employees understand how well they are

performing their tasks, leading to improved performance and job
satisfaction.

7. Structure
 o The way in which an organization arranges roles, responsibilities,
and relationships among its employees to achieve its goals.

8. Chain of Command

o The formal line of authority that defines who reports to whom

within an organization.

9. Span of Control

o The number of employees a manager can effectively oversee. A

larger span of control means more employees per manager,
while a smaller span means fewer employees.

10. Tall vs. Flat

o Tall Organization: An organizational structure with many

hierarchical levels.

o Flat Organization: An organizational structure with fewer

hierarchical levels, allowing for more autonomy and faster
decision-making.

11. Strategic Alliance

o A partnership between two or more organizations to achieve

mutual benefits, such as sharing resources, knowledge, or
technology.

12. Outsourcing

o The practice of hiring external organizations or individuals to

perform certain tasks or services that are typically done in-
house.

Chapter 8 - Entrepreneurship

1. Types of Control

o Feedforward Control: Preventative measures that are put in

place before an activity occurs.

o Concurrent Control: Monitoring processes and activities as

they occur.
 o Feedback Control: Reviewing outcomes after an activity to
make improvements for future operations.

2. I-T-O (Input-Transformation-Output)

o A framework for analyzing how inputs (materials, labor, etc.) are

transformed into outputs (finished products or services) through
processes.

3. ROI (Return on Investment)

o A financial performance measure used to evaluate the efficiency

or profitability of an investment relative to its cost.

4. Liquidity Ratios

o Financial ratios that measure an organization’s ability to meet

short-term obligations, such as the current ratio and quick ratio.

5. Current Ratio

o A liquidity ratio that measures an organization’s ability to cover

its short-term liabilities with its short-term assets. It is calculated
by dividing current assets by current liabilities.

6. Profitability Ratios

o Ratios that measure an organization’s ability to generate profits

relative to its revenue, assets, or equity. Examples include return
on sales, return on assets, and return on equity.

7. Debt-to-Assets Ratio

o A financial ratio that measures the proportion of a company’s

assets financed by debt. It is calculated by dividing total debt by
total assets.

8. Budget Approaches

o Methods used by organizations to plan and control financial

resources, including incremental budgeting, zero-based
budgeting, and flexible budgeting.

o Incremental Budgeting: This method involves using the previous

year's budget as a base and making small adjustments for the
new period, making it a simple and stable approach but
potentially inefficient if past inefficiencies are carried forward.
 o Zero-Based Budgeting (ZBB): Unlike incremental budgeting, this
approach requires managers to justify all expenses from scratch
for each new period, ensuring resources are allocated based on
current needs rather than historical spending.

o Flexible Budgeting: This budgeting method adjusts expenses

based on changes in business activity levels, making it useful for
organizations with fluctuating revenues or production demands.

9. Organizational Culture

o The shared values, beliefs, and norms that shape the behavior
and practices within an organization.

10. Organizational Learning

o The process by which organizations acquire, share, and apply

knowledge to adapt to changes and improve performance over
time.